Gann Global Financial

On this most recent retracement in Soybeans, we retraced back to what would be the angle of ascent based upon the 60-year cycle. Based upon that cycle, the market would be approach the upper $11.00 level by the middle of August if we were to replicate that cycle.

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$11.00 Soybeans By Mid-August?

Will that happen?

There are times when we can replicate a cycle very closely, times we divorce ourselves completely from a cycle, and other times we rhyme with a cycle where the percentage changes can be different. It remains to be seen how this plays out.

With respect to the time period within which the recent minor correction occurred into the low the other day just below $9.00 a bushel, we basically hit right into the target zone (see chart in video). All four time periods bottomed by April 3rd. Now the time periods are the four markets that are the closest fits over the last 60 years to what our market has done since the July of 2008 high. We very much have the same DNA of four other markets, all of which would project to lows between March 16th and April 3rd.

The reversal that we have seen with the bullish crop report does look very favorable in that we have run out of time. If this market continues lower and takes out this even minor recent low around 897, then we are probably in trouble with our forecast. If that occurs, we will have passed the point in price and time at which we would expect the market to move higher, so I am watching that very closely.

Soybean Oil: Uncanny Similarities to 1976 – 1977 precedent

It is uncanny how close soybean oil has been to the 1976 to 1977 precedent. In terms of market price pattern, the Bean Oil pushed up to $33.80, and settled between what would be the angle of ascent based upon the 1976 market and the 1978 market. Soybean Oil did surge to the upside, trading within about 30 points of the high for the move, so subscribers have been advised to place buy stops to enter long positions on a move above the highs.

I believe that even after we take out the highs, if we enter long positions at $34.01, I have no problem with the market backing and filling. Our cycle low projection is in place. The market rallied when it needed to. It did pull back because it was a little bit over-bought here. In addition, the first real crop report of the season was bullish.

It wouldn’t surprise me to Soybeans push into new recent highs, put us into long positions, and then to see some more backing and filling. I don’t have a problem with that. I don’t expect the thing to simply run away to the up side, particularly at this portion of the season. You may factor that in in terms of anything you do on the long side of the market because our forecasts tell us that it is time to buy a market.

Our trading strategy is very different. When we enter a trade, we have a definable risk.

There may be things that you do that generate buy and sell signals, in light of our forecasts. I am aware of the fact many of our subscribers do this. They follow our forecasts, but then they take their own buy and sell signals once they know the direction of the market. In this case, there is no perfect way for me to play this market, but I do expect this trade to work out.

Holding Onto Long Positions in the Face of Crop Report

The May Soybeans futures contract hit a low of $29.66, rallied up to $33.80, and in rallying to $33.80, we exceeded two minor highs at $32.57 and $32.50. We expected that the market was going to retrace beneath those highs, stop out those that went long on this minor breakout to new highs, making it very difficult on technical traders. This decline took place the day before the report. Most market participants would not hold longs into a report like this unless they had deep pockets.

We held our call options into the report, and that has worked out. An advance to new highs is going to be another piece of the puzzle confirming that we are on the right side of the market. The retracement beneath the minor breakout followed by a push into new recent highs for the move is what issues our buy signal, and so we have that buy stop at $34.01.

Again, there are only six different ways that we will basically enter a market, six different patterns. This is one of the six, and that is part of our discipline for doing the same things over and over and over and putting the probabilities in our favor.

Deflationary Pressure of Stock Market Evaporates

The other thing I wanted to mention in the soybean oil is, the deflationary pressure is off in the stock market after the second greatest stock market bear in over 200 years. The soybean complex demonstrated remarkable resiliency in the face of the dramatic breakdown in the S&P 500 into the new low on March 6th. Just as the NASDAQ made a higher bottom, so too did the bean oil and the soybeans.

My interpretation has been that the soybean complex is in strong hands. In spite of all the fear in the stock market, the deflation and the economy coming unglued, the banks failing and all of that fear, we did not see the soybean oil or the soybeans or the soybean meal drop to new lows. My guess is that there were very strong hands in there holding them into long positions. We always want to be alert to the instances when a market should do something, in this case decline along with the stock market, but it does not.

We observed a major deflationary run in the soybeans, as the stock market and every commodity was declining in waterfall fashion to the downside. But once the low was in place on November 21st in the stock market and December 5th in the soybean oil, we pretty much have divorced ourselves from the stock market as a reflection of the economy. It is always a good sign to see a market that should do something, but does not.

For many of you that are seasoned in the markets, you understand that concept. You are always looking for the markets to do something that is counterintuitive, something that doesn’t make sense, and the fact that it doesn’t make sense is what tells you something. In this case, the market ignoring bearish news is a bullish indication, so that is another factor in our favor. We will see how it plays out in the end run for us.